Question

What is a flexible budget?

Answer 1

Flexible budget is defined as a budget which by recognizing the difference between fixed semi-variable and variable costs is designed to change in relation to the level of activity attained

Budgets are updated for the events that were not kept into the mind while establishing budgets.hence flexible budgets are made for mid-term revision

Unlike fixed (static) budgets flexible budgets show the expected results of responsibility centr e for different activity levels.

While preparing flexible budget the expenses are classified in three catagories a)Fixed b)Variable c)Semi-variable.Semi-variable costs are further classified into fixed and variable

With the help of flexible budget the sales, costs and profit may be calculated easily by the business at various levels of production capacity

Flexible Budget may be prepared to facilitate comparision between target set and the actual expenditure for the period.